1971 (1) TMI 12 - SC - Income Tax

It is not open to the High Court to discard the findings of the Tribunal which was a finding of fact because the jurisdiction of the High Court under s. 66 of Indian Income-tax Act, 1922 was only advisory - Revenue appeal is allowed

Summary

Issues:
1. Whether the profits earned by a company in jute transactions were taxable in its hands or on behalf of another company.
2. Whether the High Court exceeded its advisory jurisdiction in disagreeing with the Tribunal's findings.
3. Whether the transactions were carried out on behalf of another company based on the evidence presented.

Detailed Analysis:
1. The case involved determining the tax liability of a company, M/s Ashoka Marketing Ltd., on profits earned in jute transactions. The company claimed that a portion of the profits was not taxable as it acted as an agent for Dalmia Cement Paper Marketing Company Ltd. (referred to as "D.C.P.M. Ltd."). The Income-tax authorities rejected this claim, leading to an appeal. The Tribunal found no evidence supporting the company's claim, including the absence of entries in the books related to D.C.P.M. Ltd. The High Court disagreed with the Tribunal, considering that the profits had already been taxed in the hands of D.C.P.M. Ltd. and based on a credit advice document. The Supreme Court ultimately held that the transactions were not on behalf of D.C.P.M. Ltd., reversing the High Court's decision.

2. The High Court's disagreement with the Tribunal's findings raised the issue of whether the High Court exceeded its advisory jurisdiction. The Supreme Court noted that the High Court attempted to reevaluate the evidence and findings of the Tribunal, which was beyond its advisory role. The High Court's decision to interfere with the Tribunal's findings on factual matters was deemed improper, as the High Court's jurisdiction was limited to advising on questions of law arising from the Tribunal's order.

3. The evidence presented in the case was crucial in determining whether the transactions were conducted on behalf of D.C.P.M. Ltd. The Tribunal found that the transactions were of the assessee-company and not on behalf of D.C.P.M. Ltd., based on the absence of contemporaneous entries and corroborative documentary evidence. The High Court considered factors such as financing by other jute companies and the absence of brokerage entries. However, the Supreme Court emphasized that the absence of certain entries did not prove the transactions were on behalf of D.C.P.M. Ltd. The Court highlighted the lack of evidence supporting the company's claims and upheld the Tribunal's findings, ultimately ruling in favor of the tax liability falling on the assessee-company.